Rent Control Is the Real New York Scandal
Economic theory predicts that rent control laws will result in these effects (from the Gwartney textbook):
1. Shortages and black markets will develop for housing.
2. The future supply of affordable housing will decline.
3. The quality of housing will deteriorate.
4. Non-price methods of rationing housing will increase in importance (discrimination).
5. Inefficient use of housing will result.
6. Long-term renters will benefit at the expense of newcomers.
From today's Wall Street Journal:
Today, there are 43,317 New York City apartments where tenants (or their heirs) pay rents first frozen in 1947. There are another 1,043,677 units covered by rent stabilization. All told, about 70% of the city's rental apartments are either rent controlled or rent stabilized. And because the system has been in place for more than six decades, many residents see their below-market rents as an entitlement.
This system is destructive to the city's housing stock, because landlords who own rent-controlled apartments have less incentive to pay for repairs and upkeep (see #3 above). It also warps the housing market, and forces many new arrivals to occupy the least desirable apartments (see #6 above).
Many renters who pay below-market rents are reluctant to move -- because it's too difficult to get as good a deal elsewhere in the city (see #5 above). Thus, economists Ed Glaeser and Erzo Luttmer estimate that 21% of the city's renters live in apartments that are bigger or smaller than they would otherwise occupy. The controlled rents certainly don't increase the number of affordable apartments (see #1 and #2 above).
MP: As Swedish economist (and socialist) Assar Lindbeck asserted, "In many cases rent control appears to be the most efficient technique presently known to destroy a city—except for bombing."